Two biggest procurement mistakes

18 February 2021 10:00

The biggest mistake in procurement management is made by not investing in the best available technologies and tools.  Consider the following scenario.  After much thorough research into the most appropriate software solution, a powerful, easy to use web-based system solution is implemented which amongst many other features:

  • Assists procurement, compliance, forensic and internal audit departments in their procurement vetting/audit processes and supplier management.
  • Ensures the business is protected from conflicts of interest, corruption and reputational damage caused by an association with employees, suppliers, and external irregularities associated with vendors.
  • Simplifies the entire procurement process with advanced technology to guide the easy import of data.
  • Provides constant monitoring and data analysis to ensure high risk conflicts are tackled first.
  • Reduces costs  by streamlining a manual verification process and which cut the costs of financial risk mitigation and lost revenue.

However …

The second biggest mistake is made by not implementing and using the solution properly. By not making the effort to fully understand what the solution is capable of and in failing to exploit its functionality to the fullest within the context and needs of the business. Technology alone is not enough to combat economic crime. It has to be supplemented by the correct governance structures, relevant expertise and ongoing monitoring.[1] Economic crime and fraud is constantly evolving and it is vital that when an incident occurs, the right technology, processes and people are in place to react rapidly. A slow reaction is as damaging as no reaction, yet in many cases companies don’t even bother to investigate their most serious fraud incidents, or to try to understand the issues involved and the motives of the perpetrators.[2]

Those who have investigated incidents, have discovered that it is also necessary to:

  • Disclose the incident to the board of directors – as it allows them to fulfill their roles and improve governance;
  • Disclose the incident to government authorities and/or regulators – early disclosure can result in a more favourable outcome;
  • Bolster internal controls, policies and procedures – pro-active on-going improvement and refinement needs to be part of good practice;
  • Conduct training – which promotes a stronger culture around fighting fraud; and to
  • Take disciplinary action against employees – if necessary, no person should be deemed to valuable to be disciplined.

In short when you acquire the best procurement software make sure it is used properly.

[1] PWC Global Economic Crime and fraud Survey 2020 South Africa

[1] At P. 26 and 27.